(Policy papers 2012-2013)

If only upgrading Canada’s basic infrastructure were as easy as upgrading our digital gadgets. Maybe then we would not be facing a backlog of construction and repair needs that seems insurmountable. But in the real world, our economic competitiveness is slipping because our foundations are weak, and no one can say when or where the next catastrophic failure will occur. A Canadian Infrastructure Financing Authority is one option to keep public responsibility for infrastructure while injecting private capital. The federal government must be held accountable for this pressing national priority. Si seulement les infrastructures de base du Canada étaient aussi faciles à mettre à jour que nos gadgets numériques ! Nous ne serions alors peut-être pas face à un retard au niveau des besoins de constructions et de réparations qui semble insurmontable. Mais en réalité, notre compétitivité économique sombre doucement parce que nos fondations ne sont pas solides, et personne ne peut prédire quand et où la prochaine défaillance catastrophique aura lieu. Créer une Autorité canadienne du financement des infrastructures serait une option qui permettrait de conserver la responsabilité publique pour les infrastructures tout en injectant des capitaux privés. Le gouvernement fédéral doit être tenu pour responsable de cette priorité nationale urgente.   ***** In the summer of 2011, two major transportation arteries in Montreal were disrupted by the accelerating deterioration of the Champlain Bridge and a 25-tonne piece of concrete falling onto a downtown expressway. These events showed us only the tip of an iceberg of crumbling bridges, tunnels, roads, and sewers across Canada. To run a modern country we also need to build more infrastructure, including better municipal transit networks and water-purification systems. Because of our neglect and lack of foresight, our massive municipal infrastructure deficit is now conservatively estimated (by the Federation of Canadian Municipalities) at $123 billion. The total investment needed to upgrade to 21st-century standards and ensure our competitiveness is now well beyond what the private sector can supply and more than what current taxpayers could reasonably contribute through taxes. To avoid locking our children in a financial straitjacket and making them suffer through debilitating and preventable catastrophes, we must consider new institutional arrangements for long-term financing of infrastructure. Government plays an important role in both traditional and innovative financing solutions — grants, loans, bonds, and public-private partnerships — essentially acting as an investor in projects that lay a sound foundation for sustainable growth. A Canadian Infrastructure Financing Authority would blend private and public finance. It would operate much like the World Bank and international regionally based development banks, directly lending money or guaranteeing loans to start up viable projects that will be financially sustainable over time. Toll roads, energy plants that collect user fees, and ports that charge fees to handle incoming or outgoing goods could be financed by this method. A financing authority structured in this way could mobilize large amounts of private capital in pension funds, private equity funds, sovereign funds, and other pools to invest in a wide range of the projects so essential to sustainable long-term economic growth. The Authority could match the massive public infrastructure needs with private investors on a case-by-case basis in order to make much greater progress towards more efficient building of advanced energy, transportation, and information platforms. Because it would be such a big player, the Authority could even create economies of scale, particularly in the cost of high-quality civil engineering services for major infrastructure projects. Private investors are normally reluctant to invest in infrastructure assets, which involve huge upfront fixed costs and a long average lifespan, but with assurance from a public agency that they can earn sufficient revenue to recover their initial investment over time, many will find the prospect attractive. Fundamentally, infrastructure is a matter of public policy that requires long-term planning, regardless of how it is financed. Government has an important role in deciding what infrastructure the economy needs and where, including systems that promote environmental sustainability[11] by building on world-class innovations in clean energy and technology.  Close to three-quarters of carbon dioxide emissions come from the fossil fuels consumed in transportation, manufacturing, and construction as well as electricity generation. Only government can assure adequate protection for the private investor through multi-year contracts and predictable regulatory regimes. For example, a government has to make credible commitments not to expropriate the assets once built, and it must permit the private owner to recover the initial fixed costs as promised. To ensure clear accountability to Canadians for the commitment to build and maintain our national infrastructure to the highest, most-advanced standards, the Authority would report regularly to Parliament. It would be led by a non-partisan board of directors and CEO with impeccable ethical standards and relevant credentials, appointed by the government through an open process. Members of the Authority’s administration could appear periodically before a committee of the House of Commons or Senate that would be dedicated to our national infrastructure needs and responsibilities. Building and maintaining world-class infrastructure will require bold action from our national leaders with a view to the future. In the interim, it makes sense to transfer 1% of GST revenues to municipalities to provide substantial funds for transit expansion, streets, parks, water systems, schools, and community centres. Tolls and user fees for funding expressways, water systems, and sewage networks should be expanded. Municipal zoning should encourage more family-friendly housing development close to transit stops, tying land use and density to transportation capacity. The federal government could provide for innovative borrowing requirements, including upfront loans and guarantees, to allow cities access to billions of dollars for infrastructure and other projects that would create jobs and get economic activity going, instead of making them wait for sales tax revenues to flow in.